Have Cryptocurrency? Don't Worry, We Tell You the Way to Liquefy As of now, the banks are still supporting the deposits and withdrawals and this may exist for next 3 months before the RBI guidelines come into effect.
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Soon after, the Reserve Bank of India ringfence its regulated entities such banks from doing business with cryptocurrency-based companies, the watchdog has created a lot of distress in the Indian digital currency market.
According to news reports, there are more than ten home-grown cryptocurrency exchanges that generate monthly volumes of about INR 10,000 crore with over five million users across the country.
In fact, according to a latest Mobile Majority report, Ethereum recently surpassed Bitcoin as the most searched cryptocurrency in India and the virtual currency also took over 34.4 per cent share of digital currency as against Bitcoin, which stood at 29.9 per cent.
But since the RBI's announcement news came, the trade has tumbled and some of the cryptocurrency exchanges have started to consider moving their base camp offshore, while on the side investors are panicking and liquefying their digital assets.
And if you are among the few that are terrified and keen to liquefy, Entrepreneur Media evaluates four things you should know before taking your final call.
Crypto Assets are Not Illegal at the Moment
The regulator's stance does not discuss the legality of bitcoin or other crypto assets. Sathvik Vishwanath, CEO and Co-founder of Unocoin says, "The restrictions are just for its own regulated entities. The crypto assets with exchanges continue to be safe with them."
Even Nischal Shetty, Founder and CEO, Wazirx asserts that there's no Indian law preventing people from holding or trading in crypto. It's just that you cannot deal with INR. As an Indian, if you believe in cryptos then you can hold as well as trade with crypto-to-crypto trading pairs.
Additionally, as of now, the banks are still supporting the deposits and withdrawals and this may exist for next 3 months before the RBI guidelines come into effect.
Apart from the confusion and disruption in the cryptocurrency market, RBI's move has created a lot of space for fraudsters to play foul game.
"We fear that traders might be lured by ponzie schemes, under the table dealings or engage in direct cash transactions which cannot be accounted for, and might encourage illicit trade practices. So as a trader it is important to stay informed, keep track of the market and make judicious decisions to trade wisely, rather than follow market hearsay," Rahul Raj, CEO & Co-Founder, Koinex told Entrepreneur India.
If you are planning to hold on the crypto assets after RBI's three-month deadline, Shetty from Wazirx shares a risky but some smart idea to trade in crypto without breaching any laws.
"One can sell their crypto to some other person and take cash in return. This seems to be the only way that does not encroach upon RBI's circular since you won't be using any banks for this," he points out while adding that, "You could also do a direct bank transfer to the other person selling cryptos. However, there's a possibility of your bank suspending your account if they establish that the transfer was for crypto transaction."
Moving to Offshore Exchanges
Moving cryptocurrency assets currently situated or held in India to offshore exchanges is another idea that must have cropped up in your mind, but remember India is an exchange controlled economy which creates limitations on how this can be done without falling foul of regulations or be seen as evading tax.
Akash Karmakar, a fintech and data privacy lawyer at Veritas Legal says, "With no express prohibition earlier, one method which was used to invest in cryptocurrencies offshore, was under the liberalised remittance scheme. While the ultimate responsibility to ensure adherence to exchange control regulations is on the person remitting the funds, in light of the recent notification, bank remitting funds may conduct a closer scrutiny of the intended end use. Of course, there is no way of ensuring a person doesn't mis-disclose the intended end use of the funds, but that would be a blithe and deliberate violation of the law."
Meanwhile, the liberalised remittance scheme permits a person to annually remit up to USD 250,000 per year, which limits the amount of funds which can be deployed offshore. So if you are planning to liquidate large cryptocurrency holdings within India and are keen to move it offshore through banking channels, it is likely to get noticed.
However, presently there is nothing to prevent the transfer of bitcoins from wallets in India to wallets held offshore. Given the mechanism in which blockchain based transactions work, he suggests that such wallet to wallet transfers are not subject to regulatory supervision and even if attempts were made, it would be difficult to monitor such transfers.
"Inherently the cryptocurrency system was intended to work outside of banking channels. The same as it turns out to be, now the only way for cryptocurrency trade to continue in India is outside of the regulated financial system," he taunted.